By Stephanie Booth
Ten years. That’s the average amount of time a homeowner stays in a house before a sale, according to the National Association of Realtors®.
Think that sounds shockingly short? Or way too long? The fact is, people’s reasons for selling their homes are different, as are their time frames.
Still, there are some common reasons—financial and emotional—that lead us to sell our current home and move on to the next one. And you don’t always see the reasons coming.
Read on for some telltale signs it’s time to start looking for the next home and packing your bags (and when you should settle in for the long haul).
1. You know the seller’s market is booming and you want in
Let’s start with one of the most obvious reasons to sell: You’re eager to make a profit on your property.
You need to gauge the key indicators of a strong real estate market, explains Allen Shayanfekr, CEO and co-founder of Sharestates, an online real estate investment company.
A few signals: The price per square foot for real estate in your area is increasing, the amount of time properties stay on the market is decreasing, and you’ve noticed an uptick in brokerage activity in your neighborhood. (If you’re situated in an especially hot neighborhood, you might even get a letter or a knock on the door from a listing agent who wants to help you get in on the action.)
“If any of these are true in your area,” Shayanfekr says, “think about selling up.”
2. Because your neighbors just got what for their house?
Check online real estate listings in your neighborhood, and pay attention to the “recently sold” flyers in your mailbox to keep track of comparable home prices in your area.
“If other houses on your street with the same bedroom/bathroom count [as yours] are selling for a price that you’d be more than satisfied with, it might be time to move on,” Shayanfekr says.
Another sign of a hot home sales market is the relationship of asking prices to sale prices. If home buyers are making offers fast—for as much or more than sellers are asking—it’s a seller’s market. A buyer may offer you a sales price you can’t refuse, too.
3. You’re sick of feeling financially stressed
Not everyone sells their real estate in order to pad their bank account. Some homeowners underestimated their ongoing housing costs and simply sell to ease their mortgage burden, or to cash in their equity and use it for other purposes.
If your property taxes or mortgage pa
yments have become unmanageable, the best recourse may be to sell and find another home that’s more affordable, Shayanfekr says. Selling your home is better than struggling with a big mortgage loan, and possibly risking foreclosure.
To breathe easy, your monthly housing costs, including your mortgage interest, principal, property taxes, homeowners insurance, and HOA or condo fees if applicable, shouldn’t exceed 28% of your gross monthly income.
Before you sell your home to reduce your monthly living expenses, make sure you can find another home to rent or buy in your price range, and that you can qualify for a loan at current interest rates when you do.
4. You’ve grown—but your home hasn’t
The starter home you moved into when you were expecting your first child isn’t necessarily the house you need now that you have three preteens and a capybara. It’s bittersweet to give up the memories you’ve made in your home, but if your living quarters are causing you stress rather than comfort, “take the leap and sell up,” Shayanfekr says.
Death, serious illness, divorce—these are all emotionally wrought experiences that may warrant a need for change. Relocation is another factor. But let’s not overthink things.
“Maybe you’re just tired of the same old, same old, and it’s time for a change of scenery,” says Bruce Ailion, a Realtor® and attorney for Re/Max Town and Country in Atlanta.
5. You’re over ‘high maintenance’
The average homeowner shells out $2,000 a year for maintenance services, according to a recent report by Bankrate. Not repairs, mind you, but scheduled services such as landscaping, snow removal, septic service, private trash and recycling, and housecleaning.
Sick of watching these payments steadily drip out of your bank account? You could sell, and buy some lower-maintenance real estate such as a condo or a new-build property, Shayanfekr says. You might even want to try renting, and let a landlord worry about leaky pipes and other property hassles.
6. You’ve put at least 5 years into the relationship
“If you sell too soon—assuming you have a mortgage—you haven’t really built up any equity in the home beyond the down payment,” points out Adam Jusko, founder and CEO of personal finance portal ProudMoney.com. “In the beginning, your mortgage payments are almost completely interest payments.”
In fact, unless the housing market is seriously booming (see above), you might lose money when you sell. You might even owe more than you can get from your house after closing costs.
Remember: Selling isn’t free: You’ll have to shell out to cover all of the costs associated with hiring a real estate agent, closing, and, of course, purchasing another home.
That’s why Jusko recommends staying put for at least five years, unless you have an urgent need to move. In addition to everything else, moving too quickly sends potential buyers a bad message.
“Buyers don’t feel good when it appears you are selling too soon,” Jusko cautions. “What was wrong with the house? Why are you leaving so fast? Are the basement walls about to collapse? Are the neighbors selling drugs and shooting fireworks at your house? Buyers can dream up all kinds of negative scenarios when a seller hasn’t owned the home for very long.”
Another reason you may not want to sell is if you don’t meet the qualifications to avoid paying capital gains tax on your profit from a home sale. Generally, you can exclude the gain from the sale of your home if you owned and lived in the home for two of the past five years. A sale before the two-year mark, if you don’t meet any of the exceptions, could be a costly mistake. By the time you pay capital gains tax, you won’t have as much equity left as you’d planned.
But beware of snap decisions
Of course, there are no promises that selling will be better for you in the long run. Take your time deciding if you should sell, and then study the local home sales market, with the help of your real estate agent, before you price your home. If you underprice your home, a buyer may snatch it up too cheaply. If you overprice it, the right buyer may pass it by.
Jusko and his wife lived in Chicago in the early 2000s, when home values were through the roof. After about three years, they sold at a 40% profit. But soon after moving to the Cleveland area, where they’re both originally from, home values plummeted.
“For many years, our home was worth less than what we paid,” Jusko says. “It’s only now—more than 15 years later—that I believe we could sell for more than our purchase price. And don’t get me started on how much money we’ve put into the house over that time.”
Selling your home is, above all, a personal decision. Do what will help you live—if not happily ever after—happily for now.